Crypto Academy Season 2 Week 2 Homework Post for (@kouba01) - Cryptocurrency Contracts For Difference (CFDs) Trading

This week, professor @kouba01 prepared a course article that includes all the details about the crypto currency CDF. I read the course article thoroughly. I did my research and now I'm writing my homework.

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What is a cryptocurrency CFD?

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Cryptocurrencies have managed to influence the whole world and they have become more popular day by day. As crypto coins proved itself, it enabled brokers / intermediaries to invest in this sector as well. Previously, contracts were made on products such as stocks, commodities, indices, exchange traded funds, fiat currency on the difference contracts platforms. For a few years (or more), contracts have started to be made on cryptocurrency assets. Contracts for difference platforms include traders and contract provider. We can say exactly the following for the crypto currency CDF. What is made between the trader and the provider of the difference contractor is that the difference between the opening and closing price of the cryptocurrency is concluded according to the direction of the current position. In investments made on crypto money difference contracts, the contracted crypto money is not physically owned. The operation is the same as in leveraged transactions.

If the crypto currency price moves in the direction of your expectation, you will benefit from this contract. For example, if you think the price of a cryptocurrency will increase, you should open a long position. If the price of crypto money increases as you expect, you will profit from the contract you made. Another example. If you think the crypto money price will decrease, you should open a short position. If the cryptocurrency price drops as you expect, you will benefit from this contract. If it does not turn out the way you expected, you will suffer.

I have said that cryptocurrency CFDs are very similar to leveraged transactions. While there is competition between investors in leveraged transactions on cryptocurrency exchanges, in cryptocurrency CFD competition is between the trader and the provider of the difference contract.

How do I know if cryptocurrency CFDs are suitable for my trading strategy?

It is a great advantage for us not to buy / own any cryptocurrency in crypto currency difference contracts. Because crypto money prices vary widely. The bad news is that an unexpected hacking attack can spoil all your plans.

The existence of long and short positions in cryptocurrency difference contracts is a great advantage for traders. It is possible to make a profit by opening short positions in periods when crypto currencies are in a downward trend. In periods when cryptocurrencies will rise, we can make a profit by opening long positions. While doing these, we must consider all basic and technical analysis.

With small amounts of money, we can make big profits by opening positions in the form of 10x, 20x. If things do not proceed as expected, we may lose all the money we invested.

Traders are safe with their assets / earnings as they make their transactions on the difference contract platforms. Because there are institutions to which difference agreement platforms are affiliated and accountable. If you have any problems, and if you are right, your problem will be resolved.

Are CFDs risky financial products?

Cryptocurrency CDFs are very risky investments. I have said that high profits can be made in cryptocurrency CFDs. Of course, there will be a high loss on a platform with high profits.

The similarity of crypto currency difference contracts to leveraged transactions brings with it risk. Risk is lower in spot trading. Risk is high in contracts for difference.

Imagine opening a long position worth $ 100 with 10x leverage for any cryptocurrency. Cryptocurrency's 10% drop causes you to lose all your money. Or, on the contrary, if you open a short position, the 10% rise of the cryptocurrency means the loss of all your money.

There is a double risk in cryptocurrency difference contracts. Due to the similarity to leveraged transactions and the sharp changes in crypto currency prices, cryptocurrency difference contracts pose an extra risk compared to other financial products.

Since it is a very risky financial product, you need to be sufficiently experienced in this field.

Do all brokers offer cryptocurrency CFDs?

Not all brokers offer cryptocurrency difference contract services. When crypto coins will become even more popular, all brokers will start to offer cryptocurrency difference contract service. I researched secure cryptocurrency difference contract platforms. These; eToro, Plus500 and LCG

eToro

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It is an Israeli based difference agreement platform. It was founded in 2016. You can continue your trading transactions on this platform. It also provides crypto currency difference contract service. For inexperienced traders to gain experience, they can open a Demo account and perform unreal transactions. It allows you to copy the moves of successful traders. Recently, users have been complaining about the eToro platform. On this platform, we can make difference contract transactions for almost all popular cryptocurrencies.

Plus500

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It was established in 2008. Again, its headquarters is in Israel. There are difference contract services for more than 2,000 assets. Crypto money provides difference contract services. We can open positions until 1:30. We can deal with cryptocurrencies such as Bitcoin, Bitcoin / Ethereum, Ethereum, Litecoin, Stellar, Bitcoin Cash ABC and Cardano.

LCG
They have 20 years of experience in the industry. It is the platform where you can trade difference contracts against a large number of assets (7000). It provides difference contract services on spot metals, indices, forex, stocks, commodities and cryptocurrencies. Here, difference contracts are made with popular currencies such as Bitcoin and Ethereum.

Explain how you can trade with cryptocurrency CFDs on one of the brokers (Using a demo account).

eToro is one of the most popular difference contract service platforms. It also provides difference contracts for many cryptocurrencies. It allows users to make transactions on the demo account to gain experience.

We log in to the site via the etoro.com web address. Click on the "Join now" section on the upper right.

Then we choose a username in the first box. We write our e-mail address in the next box. We also set a password in the last box, this password must be strong and the password we have not used elsewhere before. After accepting the terms, we click on the "Create account" section and complete the membership process.

As the membership process is completed, we can log into the platform. We click on the "virtual portfolio" option that I marked on the upper left.

On the newly opened page, we click on "go to virtual portfolio". Our account turns into a virtual account from a real account. In order to return to the real account from the virtual account, we need to do the same.

Then we click on the '' Trade markets '' section in the left middle part. When you click here, we see many categories such as Stocks, EFTs and Crypto. We have to click on crypto. After clicking on the crypto section, a new page appears.

We write the amount we want to deposit in the sections I marked. From the edit section, we can select detailed options, such as stop loss. We start the investment process by clicking on the open trade section written at the bottom.

We click on the "Portfolio" option on the right. We can reach all the details about our process. It also shows the details such as the money remaining in our account.

Conclusion

Cryptocurrency CFDs are very risky transactions. If you are an inexperienced person in the sector, I do not recommend making such investments. It makes no difference to you from gambling. After some experience in the cryptocurrency industry, you can make transactions in cryptocurrency difference contracts with small amounts of money you don't need.

Professor @ kouba01 thank you for this useful course topic.

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@kouba01